Sunday, July 30, 2017

Mozambique Under Threat by the IMF

The International Monetary Fund (IMF) has insisted that the full audit report on the three Mozambican security-related companies, Ematum (Mozambique Tuna Company), Proindicus and MAM (Mozambique Asset Management) must be published, and it now seems clear that no new IMF programme with Mozambique can be discussed before that happens.

At a press briefing in Washington on 10 July, William Murray of the IMF praised the fact that the audit, undertaken by Kroll Associates, had taken place and that the Attorney-General's Office (PGR) had released the executive summary of the audit report in June.

"Transparency and good governance are key conditions for sustainable, inclusive growth, and that applies to all countries", said Murray. "Now we look forward to the publication of the entire audit report in due course. At that point, we will be able to provide an informed view on the audit and its implications".

Thus, any expectations in Maputo that the mere publication of the summary would be enough to normalise relations with the IMF have been dashed.

The IMF suspended its programme with Mozambique in April 2016, when the full scale of the "hidden loans" (from the European banks Credit Suisse and VTB of Russia) became apparent. While the $850 million loan to Ematum was already in the public domain, since it took the form of a bond issue on the European market, the loans to Proindicus ($622 million) and to MAM ($535 million) were kept entirely secret.

All three loans had been illicitly guaranteed by the previous government, under President Armando Guebuza. The over two billion dollars lent to the three companies thus became part of Mozambique's foreign debt, and pushed it beyond the limits of sustainability.

All other major western partners followed the IMF's lead and suspended financial aid to Mozambique. In particular, the 14 donors that used to provide direct support to the Mozambican state budget suspended their disbursements. A basic condition for restoring normal relations was an independent audit of Ematum, Proindicus and MAM - hence the hiring of Kroll.

But the audit is incomplete, because the companies refused to cooperate fully with the auditors. Kroll said the companies only provided "limited financial data, including incomplete trial balances and bank statements for certain periods, and incomplete supporting documentation, such as loan facility agreements and supplier contracts. As a result, it became apparent that a significant amount of the information originally envisaged to be held by the Mozambique Companies in Mozambique was not available".

Kroll looked at the assets that had been purchased, and compared the value stated on invoices, with an independent valuation - and found a discrepancy of $713 million. In addition, other funds were not accounted for.

Asked whether the IMF wanted to track down all the money so far unaccounted before resuming normal relations with Mozambique, Murray replied "the report provides useful information on how the loans were contracted and on the assets purchased by the companies. However, there are information gaps, in particular on the use of the loan proceeds. We want to see those information gaps closed".

Murray's press briefing followed a visit to Mozambique by an IMF mission headed by Michel Lazare. His final statement from the mission also pointed to the gaps in the audit report. He demanded that the government "take steps to fill the information gaps and to enhance its action plan to strengthen transparency, improve governance, and ensure accountability". Lazare also said the mission would not result in any discussion at the IMF board - in other words, there will be no new IMF programme for Mozambique in the near future.

Lazare demanded a whole string of austerity measures. He wanted the 2018 budget to concentrate on reducing the fiscal deficit, notably by eliminating tax exemptions and "containing the expansion of the wages bill".

In other words, the IMF is demanding that state employees pay for the crisis. Last year's sharp inflation had already reduced real wages, and the increase in state wages announced earlier this year came nowhere near compensating for this. Lazare assumed that the impact of austerity measures on poor households could be cushioned by "protecting critical social programs and reinforcing the social safety net".

Lazare also wanted "only the most critical public investments to go ahead", while attempts should be made "to strengthen the financial position of loss-making companies and limit the fiscal risks they represent". He did not name those companies, but presumably include Mozambique Airlines LAM and fuel company Petromoc.

Editor's note: AllAfrica receive a request to publish the following statement issued by the VTB Press Office

"VTB conducted its transactions with the Mozambican state-owned companies and government in accordance with all applicable laws and approvals, including from the Mozambican Central Bank. This was confirmed by our international and Mozambican legal counsel. Moreover, the government of Mozambique confirmed to us that they were following the necessary internal and external legislation and that comprehensive information on the transactions was disclosed to creditors and investors. As we have previously said, the total public debt number disclosed in the prospectus of the issued sovereign Eurobond was inclusive of all outstanding direct and publicly guaranteed government debt. Furthermore, in the transaction documentation the government undertook to include the guarantees in the budget.”

No comments:

Pan-African News Wire

The Pan-African News Wire is an international electronic press service designed to foster intelligent discussion on the affairs of African people throughout the continent and the world. The press agency was founded in January of 1998 and has published thousands of articles and dispatches in newspapers, magazines, journals, research reports, blogs and websites throughout the world.
The PANW represents the only daily international news source on pan-african and global affairs.
PANW editor Abayomi Azikiwe is often solicited by various newspaper, radio and television stations for comment and analysis on local, national and world affairs. He has served as a political analyst for Press TV and RT worldwide satellite television news networks as well as other international media in the areas of African and world affairs. He has appeared on numerous television and radio networks including Press TV, RT, Al Jazeera, China Global Television Network, BBC, NPR, Radio Netherlands, the Australian Broadcasting Corporation, South Africa Radio 786, Belgian Pirate Radio, TVC Nigeria and others.